WASHINGTON (Legal Newsline) - The Securities and Exchange Commission announced Friday that fraud charges have been settled and an emergency asset freeze has been requested to halt an alleged $600 million Ponzi scheme on the verge of collapse.

The SEC alleges that online marketer Paul Burks of Lexington, N.C., and his company Rex Venture Group have more than one million Internet customers nationwide and overseas through the website ZeekRewards.com, which they began in January 2011. Customers were allegedly offered several ways to earn money through the ZeekRewards program, and two methods involved purchasing unregistered securities in the form of investment contracts.

Burks has agreed to settle the SEC's charges against him without admitting or denying the allegations, and agreed to cooperate with a court-appointed receiver. Burks has agreed to relinquish his interest in the company and its assets plus pay a $4 million penalty.

Investors were promised up to 50 percent of the company's daily net profits through a profit sharing system in which they accumulate rewards points that they can use for cash payouts, the SEC says. However, according to the SEC's allegations, the website fraudulently conveyed the false impression that the company was extremely profitable when, in fact, the payouts to investors were from funds received from new investors in classic Ponzi scheme fashion.

"The obligations to investors drastically exceed the company's cash on hand, which is why we need to step in quickly, salvage whatever funds remain and ensure an orderly and fair payout to investors," said Stephen Cohen, an Associate Director in the SEC's Division of Enforcement.

"ZeekRewards misused the power of the Internet and lured investors by making them believe they were getting an opportunity to cash in on the next big thing. In reality, their cash was just going to the earlier investor."

The SEC's complaint alleges that the investor funds are at risk of dissipation without its emergency enforcement action. It claims that last month, ZeekRewards took in approximately $162 million while total investor cash payouts were approximately$160 million.

Eventually the income would exceed the payouts and later investors would lose their money, the SEC says. ZeekRewards has paid out nearly $375 million to investors to date and holds approximately $225 million in investor funds in 15 foreign and domestic financial institutions, said the SEC.

Those funds will be frozen under the emergency asset freeze granted by the court at the SEC's request. The court has appointed a receiver to collect, marshal, manage and distribute remaining assets for return to harmed investors.

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